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Creative Technology, a developer of multimedia solutions, said that it would refocus its 3D chip architect 3Dlabs to design graphics technologies for portable handheld devices. 3Dlabs originally developed graphics chips and cards for mainstream market, but then concentrated on graphics cards for professional users.

The company best known for its Sound Blaster audio cards said its division 3Dlabs would transition from the “shrinking” professional workstation graphics market to focus on portable handheld devices which require intensive media processing for video, audio and increasingly powerful 3D graphics.

Creative Labs acquired designer of professional graphics accelerators 3Dlabs back in 2002. To complete the acquisition, the company paid approximately $37.0 million cash and issues approximately 6.3 million Creative shares for the acquisition. The company’s original plan used to stay in the professional graphics business while leveraging the technologies by 3Dlabs onto consumer market. Even though the company used to say that it had no plans to release consumer-oriented products based on 3Dlabs’ Wildcat VP technology it actually introduced Graphics Blaster Picture Perfect graphics card in early 2003, which did not become popular.

Later on Creative Technology exited consumer graphics cards business and ceased to sell graphics cards based on chips by ATI Technologies and Nvidia Corp. 3Dlabs has been gradually losing share and sales on the market of professional graphics accelerators, as ATI’s FireGL and Nvidia’s Quadro gained ground.

The most recent announcement claims that 3Dlabs will refocus its 3D graphics business on the portable handheld device market and de-emphasize its professional workstation graphics business, which means that the company may continue to support it professional products for some time, but no new products for desktops are likely to be released.

The transition will result in a workforce reduction of approximately 100 3Dlabs employees. As a result of the 3Dlabs refocus, Creative expects to take a one-time restructuring charge of approximately $9 million in the current fiscal quarter and a non-cash impairment charge of approximately $25 million for goodwill and intangible assets relating to 3Dlabs.

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